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...also created possible defense for them. In 2003, in State department of Health Services v. Superior Court ("McGin-nis"), the California Supreme Court provided new template by closing the door on employers seeking to avoid liability but, at the same time, offering a way to apportion damages between employer and victim and establish an upper limit of damages for the employer, depending on the circumstances. The authors believe this model should prevail over the Ellerth/Faragher precedents.
Introduction
For years, sexual harassment law concerning the extent of an employer's liability for claims of harassment by supervisory employees has been a policy quagmire. In 1998, the United States Supreme Court tackled the critical issue of "vicarious liability"--the employer's liability for the harassing behavior of supervisory employees--in the Burlington Industries, Inc. v. Ellerth ("Ellerth") and Faragher v. City of Boca Raton ("Faragher") decisions. While ruling that employers could be held liable, the Court also created a defense for those seeking to avoid liability for a supervisor's illegal behavior. In the intervening years, however, the Court's position has come under critical scrutiny, and it is far from clear that the Supreme Court provided a truly satisfactory resolution to policy questions involving the assignment of liability or the partitioning of damages.
Both employers and employees deserve a legal and ethical framework that provides a certain, reliable, unambiguous, and equitable means for distributing the rights and responsibilities of the respective parties. A recent decision by the California Supreme Court, in State Department of Health Services v. Superior Court ("McGinnis"), provides a provocative yet workable process for achieving this important public policy objective. The California high court elected to resolve the issue of employer liability for supervisory harassment in favor of the victim by eliminating any employer defense against liability. It also focused on the more critical question of apportioning damages resulting from the harassing behavior. As a means for providing incentives to prevent sexual harassment, or as a way to fairly compensate victims once sexual harassment has occurred, the McGinnis ruling in California, in our opinion, is a superior approach to balancing the workplace interests of both employers and employees.
This article first reviews and critically evaluates the employer defense against liability created by the U.S. Supreme Court in Ellerth and Faragher. Next, we summarize the California Supreme Court's ruling in McGinnis, with particular emphasis on the court' s adoption of a "strict liability" (i.e., liability without fault) standard for assigning to the employer the responsibility for sexual harassment by a supervisor. We also review the California Supreme Court's focus on the "avoidable consequences" doctrine to apportion damages arising from sexual harassment, thereby creating an economically efficient and administratively effective system for balancing workplace rights and responsibilities. In addition to calling on lawmakers and the courts to adopt the California approach, we also provide practical advice on how employers can best function under this suggested framework.
The Ellerth/Faragher Defense: A Flawed Compromise
Courts and legislatures have typically agreed on the appropriate standard of employer liability--negligence--for harassment of employees by co-workers. The negligence standard creates a substantial safe harbor for employers provided they either had no prior knowledge of the harassing behavior, or that they did have (or should have had) such knowledge and acted reasonably to prevent subsequent harm.
Harassment by supervisors, however, has been a much more problematic and controversial area of the law. The evolution of the employer's liability in these situations took a major turn as a result of the U.S. Supreme Court's 1998 decisions in Ellerth and Faragher, which suggested new standards for employer liability. While initially thought to be a workable solution that advanced public policy in the area of workplace sexual harassment, subsequent decisions by the lower courts created significant uncertainties for managements seeking to rationalize the employer defense created by the Ellerth and Faragher rulings. And for many victimized employees, the promise of greater workplace justice has not been realized.
* The essence of the Ellerth/Faragher defense
Confronted with the question of an employer's liability for supervisory harassment, the Supreme Court in Ellerth stated that the proper initial inquiry is whether a "tangible employment action" changing the terms and conditions of employment (e.g., firing, demotion, relocation) occurred when an employee refused to submit to a supervisor's demand for sexual favors. When the supervisor acts with the authority of the employer in effecting a tangible employment action, the employer is strictly liable for the supervisor's harassing behavior. The liability exists even though the...
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